4/02/2012 @ 9:57AM106,573 views

There Is No Obamacare Tax On Most Home Sales. Really.

A home is for sale in Glendale, California May 31, 2011. US home prices fell to new, post-bubble lows in March with no end to the decline in sight according to analysts. The latest Standard & Poors Case-Shiller home price index figures released May 31 show prices for homes in 20 cities fell 0.8 percent from February, the eighth drop in a row. Prices are down 33.1 percent from their July 2006 pre-bust peak. (Image credit: AFP/Getty Images via @daylife)

It is the unfounded rumor that never dies: You will have to pay a 3.8 percent federal health care tax on the sale of your house.

For all but a handful of taxpayers, this is not true. It is wrong. It is urban myth. It is the revenue equivalent of death panels or the Halliburton conspiracy to start the Iraq war.

This is one of those seemingly immortal Internet stories. You know the ones: They usually start with the assertion that, “They don’t want to know this but….” In the words of one blogger, “Obamacare will impose a 3.8 percent tax on all home sales and real estate transactions.”

Umm, no it won’t. Yes, the health law will impose a 3.8 percent tax on investment profits and other non-wage income starting in 2013. But that tax applies only to couples with adjusted gross income of $250,000 (or individuals with AGI of $200,000). About 95 percent of households make less than that, and will be exempt from the law no matter what.

In addition, couples who sell a personal residence can exclude the first $500,000 in profit from tax ($250,000 for singles). That would be profit from a home sale, not proceeds. So a couple that bought a house for $100,000 and sold it for $599,000 would owe no tax, even under the health law.

If that couple had AGI in excess of $250,000 and made a profit of $500,010, it would owe the new tax. On ten bucks. That would be an extra 38 cents.

The Tax Policy Center figures that in 2013 about 0.2 percent of households with cash income of $100,000-$200,000 would pay any additional tax under this provision. And they’d pay, on average, an extra $235. Keep in mind that is added tax on all sources of non-wage income, not just home sales.

Still, like Dracula, this rumor can’t be killed. Politfact tried to knock it down in 2010. A couple of months ago, my Tax Policy Center colleague Donald Marron did the same in a Tax Notes article called “Health Reform’s Tax on Investment Income: Facts and Myths.”

People who send Internet chain letters probably don’t read Tax Notes. Still, imagine Donald’s surprise when just last week he met a guy in Kansas City who insisted that the tax not only exists, but the rate is 7 percent (some sort of weird bracket-creep, I guess).

Now imagine my surprise when, after I wrote a TaxVoxarticle the other day about the (real) tax provisions of the health law, I got an email from a frustrated housing industry tax specialist. “There is usually some confusion/disinformation associated with new tax rules,” he wrote, “but I’ve never seen an issue that has as much as this one.”

So the bottom line is this: If you are a married couple whose AGI exceeds $250,000, and if you make more than a $500,000 profit from the sale of your house, yes, you may owe this tax. But if you are anybody else, spend your time worrying about how you’re going to win the next $600 million lottery—or whether you are going to get bopped in the head by a stray asteroid on your way to work.

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of course the President and his staff could make millions on real estate sales, but since they wrote a amendment exempting themselves from Obama Care and related taxes, they have nothing to worry about

Silly me for not trusting the government, but I also wonder if all these threshold numbers are all indexed to inflation. They did it before with the AMT, which was passed with the “don’t worry it will just affect a few people” attitude. Or the telephone excise tax, which initially taxed the very few that had phones. Of course I could also trust that they would not help cause inflation by printing money. As the spirit of the article goes, I probably shouldn’t worry and move back into the sheep herd.

Ok. I’m right with you until I hear that this real estate tax for health care is the revenue equivalent of death panels. Not a congruent metaphor, of course, but if anyone doesn’t believe that death panels, under whatever name, would exist under Obamacare, then that person is simply deluded.

Of course the language would be different, but the result — a cut-off age for heart transplants, for example. Or inexplicable delay in getting necessary testing for cancer treatments if one is over age 70, for example, is what will happen. England is the best example, but there are many others. Once government controls the system, the next big thing will be to control costs.

With all of the “internet rumors” floating around, people are looking for the truth, an article that spells everything out….just brass tacks. I am an educated woman and I do not appreciate being spoken down to or chided in the condesending manner of the author of this piece.

There will be no sales tax on “Most” home sales.

Therefore, Obamacare DOES have a stipulation that includes a 3.8% sales tax on home sales.

Qualifying the denial by stating MOST will not be taxed is ridiculous.

Listen, I am not looking to be argumentative but as Wendy said YEP there is a 3.8 tax on real estate…so let me say, who cares…I really don’t think there are many people going to sell a piece of property, home, etc. that is going to make a PROFIT of 500,000 dollars and if so, oh well…right at this moment, a family member has their house on the market and it needs to sell, their asking price is now LOWER than what they bought it for…this is at min state wide here in new jersey…another, neighbors getting divorced neither can afford to buy the other out and they won’t sell it at a loss…if there is someone out there that can actually make a profit of that margin, then they can afford this tax.

A further note, this following link should bring anyone who wants to understand this Act and the Taxes that have been build into it, should give it a read http://www.newsmax.com/GroverNorquist/Obamacare-20-hidden-taxes/2012/06/29/id/443995

As Justice Roberts did on this past Thursday, with his approach of this being called a tax, so too are many of the “taxes” aka penalties included…you must have an open mind and see between the lines that some of these “taxes” are creatively structured to STOP insurance companies (and very specifically noted Blue Cross / Blue Shield) and love #19 the more the ins companies raise their premiums the more taxes they will pay….yay!!! That is going to make them put on a hat, aka CAP.

Lastly, I don’t consider a business with 50 + employees “small”… …my son owns a SMALL business and he is well under the 50 mark…(that’s full time employees by the way)

I work for a school system in North Jersey as a Teacher/personal Aide (NO UNION)…our district has been creatively SIDE STEPPING providing us with health care benefits for years… NO one works more than 19.5 hours, they won’t even consider having anyone go over those hours because they would have to either provide the health coverage or reimburse that person for the coverage.

As an independent voter, I have no ties to either party but my husband, a Republican, happened to catch some of Bachmann’s interview on CNN this afternoon. He was upset because there would be a huge tax on everyone, who sells a home, due to Obama Care. I don’t know what Bachmann said but it was enough to get my husband riled up. If someone is going to report information, then let it be the whole story. A half story is set to deceive; a half truth is a half lie. Thank you for clearing up some questions for my husband, and me, on this particular issue. I will not vote for Obama but the Republicans have crossed the line of good taste, and it’s disgusting. The sky is falling!

Thanks for this. I received one of the urban myth emails spewing such nonsense. I was not aware of the fabrication. I did a little research and included this piece in my reply to the sender and all on his list of recipients. No one is better off when outright lies are deemed credible.

So what I gather from this article is that I will be paying 3.8% more in taxes as 90+% of my income does not come from wages. I am also paying income taxes on all of my income. If I was working and received wage income, I would be excempt. this is an unfair tax. Hand it to Obama to screw us again.